SpaceX’s planned initial public offering, a marquee deal sized at $75 billion and poised to become the largest IPO on record, is expected to draw substantial attention from retail investors and in doing so may deepen the current malaise in cryptocurrency markets.
Celebrity entrepreneur Elon Musk’s space and satellite-communications business, which merged with his AI venture xAI earlier this year, is reportedly aiming for a valuation near $1.75 trillion. The company has set aside as much as 30% of the offering - equivalent to about $22.5 billion - for retail investors, a significant allotment for a blockbuster IPO that historically would have been dominated by institutional buyers.
Analysts and crypto-market executives said that the size of the deal and the unusual retail allocation are likely to prompt a rotation out of risk assets, notably cryptocurrencies, as retail and other investors free up liquidity to buy shares in SpaceX and potentially in other hot initial public offerings expected this year, including those from AI-focused companies.
"Crypto is a funding currency for a lot of this," said Spencer Hallarn, global head of over-the-counter trading at GSR, a crypto trading firm and liquidity provider. "We’ve got to find $75 billion for this IPO, and it’s got to come from somewhere."
Market timing for SpaceX’s intended Nasdaq listing is sensitive for cryptocurrencies. Bitcoin, the largest digital asset by market value, was last trading near the $60,000 level, roughly 52% below its October all-time high of $126,223. Crypto markets have already been under pressure: Bitcoin tumbled 15% in the prior week, the sharpest weekly decline since November 2022, when the FTX exchange collapsed.
Adding to downward pressure on crypto, Michael Saylor’s Strategy - identified in the market as the largest corporate holder of bitcoin - disclosed that it sold some bitcoin last week, marking the first such liquidation since 2022.
Observers point to the appeal of speculative AI-linked investments to the same cohort of retail investors who have fueled crypto enthusiasm. SpaceX’s prospectus shows the company overall is not profitable, and its high valuation rests on expectations of sustained rapid expansion tied to plans to develop AI offerings for enterprises as well as other ambitious projects such as missions to Mars and the establishment of AI data centers in space. That blend of long-term, speculative ambitions helps explain why some investors may prioritize equity exposure to SpaceX over continued crypto holdings.
"A SpaceX IPO would likely pull some capital out of crypto, at least initially. Both compete for the same pool of risk capital," said Thomas Puech, CEO of crypto trading firm INDIGO. He added that, compared with crypto, AI is "the ’sexier’ trade at the moment."
Sentiment toward bitcoin has cooled among some investors, according to market analysts. "It really is out of favor with investors," said David Morrison, senior market analyst at Trade Nation, noting that bitcoin has lost much of its novelty and luster for a section of the investor base. "Excitement over the SpaceX IPO isn’t helping either."
Institutional flows also show signs of reallocating. Outflows from crypto exchange-traded funds accelerated, topping more than $2 billion in May, according to Sui Chung, CEO of crypto index provider CF Benchmarks. Those ETF products, introduced in 2024, initially helped boost crypto prices and institutional involvement in the market. "Obviously, some of the money that has left crypto is finding its way into the equity market," Chung said, while cautioning that there is no certainty that the redirected funds will specifically flow into SpaceX.
Other market dynamics may compound headwinds for cryptocurrencies. Semiconductor stocks have rallied strongly, up about 170%, underscoring investor enthusiasm for technology-related equities. At the same time, market expectations that the U.S. Federal Reserve may raise interest rates this year could push investors toward assets that offer yield or are perceived as safer, rather than high-volatility speculative holdings.
"It’s really hard to see some significant tailwinds," Hallarn said when assessing the prospects for a crypto recovery in the near term given the confluence of a major retail-focused IPO, other anticipated technology listings, and a potentially tighter monetary policy backdrop.
Implications for markets
- Retail demand for a very large IPO with significant direct allotment could reduce liquidity available for speculative assets, including cryptocurrencies.
- AI-focused equity opportunities, embodied by SpaceX's combination of space ambitions and enterprise AI plans, may draw investor attention and capital away from crypto markets.
- Macro factors such as prospective Fed rate hikes and strong performance in semiconductor equities may amplify the reallocation away from high-volatility assets.
Quotes and data cited
- SpaceX IPO size cited at $75 billion with up to 30% (about $22.5 billion) for retail investors.
- SpaceX valuation expectations reported around $1.75 trillion.
- Bitcoin trading near $60,000, down about 52% from its $126,223 October peak.
- Bitcoin fell 15% last week, the largest weekly drop since November 2022.
- Outflows from crypto ETFs exceeded $2 billion in May.